By Barani Krishnan
primefinnews.com – President Donald Trump’s tendency of extending one hand to the Chinese and keeping the other ready to swat is costing oil bulls. Crude prices dipped again Tuesday on reports of more punitive U.S. action for China, even as the Federal Reserve indicated easing action that could help commodities.
U.S. West Texas Intermediate crude settled down 12 cents at $52.62 per barrel.
U.K. Brent oil closed down 11 cents at $58.24.
Crude prices fell almost 1% earlier in the sesion on reports that the White House was moving ahead with efforts to limit capital flows into China and adding more Chinese firms to a blacklist.
A South China Morning Post report said that China had toned down expectations ahead of high-level trade talks between the two countries set to resume on Thursday after being stalled since May. The report said the Chinese delegation could depart Washington a day earlier than scheduled.
China also signaled it would hit back after the U.S. placed eight of the country’s technology giants on a blacklist over alleged human rights violations against Muslim minorities, Bloomberg reported.
Asked Tuesday whether China would retaliate over the blacklist, foreign ministry spokesman Geng Shuang told reporters: “Stay tuned.” He also denied that Beijing was guilty of human rights abuse in the far west region of Xinjiang.
“Obviously, this is casting a darker shadow on the trade talk optimism that we saw yesterday,” Phil Flynn, energy markets analyst at the Price Futures Group in Chicago, said.
Toward the close, oil pared much of its losses after Federal Reserve Chairman Jerome Powell said the central bank will resume purchases of Treasury securities in an effort to avoid a repeat of recent turmoil in money markets.
Powell left his options open on interest rates ahead of the central bank’s policy meeting scheduled for Oct. 29-30.
But primefinnews.com’s Fed Rate Monitor Tool showed the probability for a rate cut as high as 82.3% for the forthcoming meeting, versus 72.7% on Monday. So far this year, the Fed has conducted two quarter-point rate cuts, back to back in July and September, to try and preserve the U.S. economy’ record decade-long growth.
“So, while the Fed might indirectly be helping oil and other commodities with its asset purchases, Trump is continuing to hammer the markets by intensifying his war with China,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.
It was not just trade troubles in oil’s way on Tuesday.
Demand for crude also appeared to be turning into a problem with the U.S. Energy Information Administration cutting this year’s world oil demand growth by 50,000 barrels per day and its 2020 projection by 100,000 bpd.
The EIA also projected U.S. crude output to rise by 1.27 million bpd to 12.26 million this year and by 910,000 to reach 13.17 million in 2020.